Corporate Insolvency and Governance Act Now Effective
At a Glance
The Corporate Insolvency and Governance Act 2020 (the “Act”) was enacted on 25 June 2020, implementing landmark measures to improve the ability of companies to be efficiently restructured. It is hoped that it will reinvigorate UK rescue culture and support the UK’s economic recovery. It also includes temporary measures to alleviate pressure arising from the COVID-19 crisis.
The vast majority of the Act’s provisions are effective from 26 June.
This analysis summarises our initial thoughts on key aspects of the Act. Of course, early cases will be key in clarifying parameters.
The Act introduces:
- Restructuring plan: a new flexible cross-class cram-down “restructuring plan” procedure
- Moratorium: a new stand-alone moratorium to help business rescue
- Ipso facto (termination) clauses: measures to prevent suppliers from relying on termination clauses in contracts solely by reason of the counterparty’s insolvency
- Temporary suspension of winding up petitions, statutory demands and wrongful trading: the temporary suspension of winding-up petitions and statutory demands where a company’s inability to pay is the result of COVID-19, and temporary amendments to wrongful trading provisions — to 30 September 2020, with a power for further extensions
- AGMs: temporary provision for virtual AGMs and general meetings, given current restrictions on public gatherings
- Filing requirements: temporary provision for further extensions to filing deadlines at Companies House
Pre-pack reform: The Act also revives the power of the Secretary of State, by further regulation, to prohibit, or impose requirements in respect of, pre-pack sales by administrators to connected parties. That power will now expire on 30 June 2021.
Differences from draft Bill: The Corporate Insolvency and Governance Bill was first published on 20 May 2020. It was pushed through Parliament on an accelerated timetable, with minimal opportunity for market comment or amendments. Accordingly, there are only minimal differences between the Bill and the Act, which we flag in this analysis.
Note: Since this Alert was published, certain of the temporary measures within the Act were extended (or were allowed to lapse but were subsequently reinstated). For further detail see our updated Alert.
